Foxconn, Apple, and the Perfect Storm
Image by Presentsquare Presentsquare from Pixabay
Foxconn Sees Highest Q1 Net Income Since 2014
13 MAY 2022 - I wonder whether a phrase we hear more in the coming weeks and months might be, “even Apple.” As in, “Top names in electronics are having trouble meeting demand - even Apple.” We’ve already seen that with the Mac, with reports of orders placed as early as February slated for delivery as late as June. But new word from Foxconn indicates that things may get worse for other product categories before they get better.
First, the good news for Foxconn. A piece from Apple Insider says the world’s largest contract manufacturer just reported its highest first-quarter net income in eight-years. This it did by being able to make everything everywhere all at once. When smaller firms went into lockdown, Foxconn was able to keep cranking out product. Apple, being Apple, was able to move orders from those shuttered, smaller firms to still functioning Foxconn facilities. This is not lost on Foxconn. The piece has the manufacturer’s chairman Young Liu saying:
The fallout from the pandemic on logistics is sizable…There are many variables in the market due to the pandemic, the supply chain, geopolitics and inflation.
Normally under these kinds of circumstances we would be more cautious. But most recently, our visibility has improved.
Apple Insider had the chairman indicating that lockdowns in China had “only a small effect on Foxconn,” since it has plants all over China and all over the world. Everything everywhere all at once.
Certain Uncertainty
It would seem, as long as everything can keep on keeping on, Foxconn and Apple would be fine. But can they? A report from 9 to 5 Mac has Liu indicating - maybe not. Citing a piece from Reuters, the report says the chairman warned that revenue this quarter form smartphones and other electronics could fall. This as demand from consumers cools (thanks to inflation) and supply chain issues make it more difficult to meet the demand that is there.
“Even Foxconn,” which could mean, “even Apple.” While the Apple Insider piece had the chairman saying:
The fallout from the pandemic on logistics is sizable…There are many variables in the market due to the pandemic, the supply chain, geopolitics and inflation.
Normally under these kinds of circumstances we would be more cautious. But most recently, our visibility has improved.
The Reuters piece cited by 9 to 5 Mac had a different read. That one said:
“There are many uncertainties in the market at the moment,” Foxconn Chairman Liu Young-way told a post-earnings call, citing the pandemic, geopolitical risks and inflation among them for the year.
“They are presenting quite some challenges to demand and supply,” Liu said
Apple Insider seems to be reading optimism into the chairman’s comments, while 9 to 5 Mac is reading in pessimism. Well, for smartphones and other such electronics. The 9 to 5 Mac piece sees Foxconn’s moves into cars as one way for the company to shore up against the apparent slump in consumer electronics. Kind of curious how that makes everything better. They’ll still have to contend with chip shortages, it seems. Even the folks who make the machines that make the chips say shortages will persist for the next couple of years.
On the Apple side, 9 to 5 Mac seems to want to lay the blame at the Cupertino-company’s feet for a perceived over reliance on China. Certainly, that case could be made. At the same time, if the world’s largest contract manufacturer is hinting at trouble, maybe it can’t all be at Apple’s feet. And maybe blame is silly anyway.
You know what phrase we haven’t heard so much lately? “Perfect storm.” It’s one that gets used a lot when people are talking from the outside looking in. With the storm of the pandemic plus the storm of component shortages being broadsided by the storm of war all churning seas of shortage and inflation - I’m not sure when the term “perfect storm” would me more applicable. You know… since the actual perfect storm.
